BS 620 W7 12 Paper 5 $ per page

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Twitter, Inc. (Twtr.N) Strategic Plan

Student Name

American Public University

BUSN620: Strategic Management

Instructor Name

Date

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Executive Summary

Twitter Inc. pioneered the use of the hashtag and instant delivery of real-time news. Despite

starting as an innovative company in 2006, presently, the company has a weak financial footing

and needs to realign its strategies to survive in the social media industry. Internal weaknesses

resulting from the high turnover of executive leaders, as well as macroeconomic factors, such as

security concerns, continue to worsen the future of the company. Twitter has fierce competitors,

most of which comprise social media networks plus news media companies. Nevertheless,

Twitter has a distinct competitive advantage because of differentiated market segments, and also

the millions of active users. Such a competitive edge gives Twitter an upper hand to distinguish

itself from its competitors if it can realign its strategies and also adopt additional revenue growth

strategies. By leveraging its value proposition and strengths, Twitter Inc. can improve its market

position and become a leader in news delivery and also social media networks.

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TWITTER, INC.

Company Overview (TWTR.N)

Twitter, Inc. (TWTR.N) is a microblogging service for the distribution of instant message

technologies. It incorporates aspects of social networking websites such as Facebook and

Myspace to create a network of users who can communicate with brief tweets or messages. Users

can also choose to track a specific topic, thereby creating dialogues through twitter feeds.

In addition to providing message services, Twitter also embraces third-party developers

and offers versatile applications. In 2010, Twitter moved to incorporate advertisements as an

avenue for revenue generation. By 2013, Twitter was described as the SMS of the internet and

was ranked as the most visited website. As of 2019, twitter had 321 million active users and

generated revenues amounting to $3.46 billion (Reuters Inc., 2020). Nevertheless, despite the

popularity and the number of active users, Twitter has been marred by privacy issues, and a

decrease in active users, which has seen it lag in comparison to a social media company like

Facebook.

Company History

Twitter was developed by Biz Stone and Evans Williams in 2006. Both Williams and

Stone previously worked at Google, but later left to launch the podcasting venture known as

Odeo. Williams began experimenting with one side project, a short message service (SMS),

which was then named Twttr. Williams later bought out Odeo and created Obvious Corp

(History Editors. Com, 2020). Engineer Dorsey and Jack joined the management team and

helped complete the version of Twitter. Thanks to venture capital Twitter was debuted in March

2007, at Austin Texas. In April, Twitter Inc. was created as a corporate entity.

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Twitter was primarily established as a free SMS platform with an element of social

networking. Therefore, it lacked a clear revenue stream that was common in other sites that had

membership fees and banner advertisements. By 2009, Twitter users had increased 1300 percent

(Meyer, 2019). However, it remained unclear whether Twitter could achieve financial

independence from its venture investor and make profits similar to Facebook, which has done so

in only a year.

Out of the need to monetize content to earn revenues, Twitter unveiled promoted Tweets

as the primary source of revenue in 2010. In the same year, Twitter collected more than one

million followers when the Actor Ashton Kutcher emerged the winner in a race with CNN. The

mass following was attributed to celebrity e-watching. Soon businesses began using the services

for promotions. Twitter was used in the political scene in the US presidential elections

(Encylopaedia Brittanica, 2020). Generally, Twitter usage spiked during prominent events such

as the FIFA World Cup 2010, NBA games, and other national events.

Over the years, Twitter made significant acquisitions and strategic alliances. It partnered

with Yandex, a Russian search engine in February 2012. Twitter acquired and launched Vine, a

video clip company in January 2013 (Meyers, 2019). Vine has released a standalone mobile app

that allows users to create and share six seconds of videos. Vine allowed for people to take short-

form videos. However, Instagram’s introduction of short videos and later Snapchat Snap soon

followed. Twitter failed to differentiate the services, and soon competitors shifted to new

platforms forcing Twitter to shut down Vine in 2016. In June of 2013, Twitter acquired

Crashlytics to develop its mobile products. Twitter also acquired Trenndrss and MoPub in the

same year. Some significant acquisitions that were made in 2014 include the purchase of Namo

Media, a firm that specializes in advertisements for mobile devices, Snappy TV a video editing

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service, and Cardspring. Cardspring offered coupons that could be automatically synced to user’s

credit cards offering discounts when shopping in physical stores. Following security concerns,

twitter acquired a password security start-up called Mitro. In 2015 Twitter acquired an

advertising network for users of social media known as Niche; Twitter also acquired Periscope,

live streaming, Tellapart, a commerce ad tech firm, and an artificial intelligence start-up known

as Magic pony (Bruns & Burgess, 2016). As Twitter continued to acquire small start-ups, it also

developed spam problems that present a challenge to date.

A significant milestone for Twitter came in 2013 when Twitter becomes a public

company. Its Initials Offering raised $ 1.8 billion, giving the company a market value of $ 31

billion. On the first day of trading, the shares opened at $ 26.00 and closed at $ 44.90. In

February 2014, Twitter published its first public annual financial statements reporting a loss of $

511 Million. Twitter’s stock prices remained stagnant until 2016, when the shares rose by 20%

following rumors of a takeover by Alphabet (formerly Google), Microsoft, Verizon, and

Salesforce. However, no sales have been made to date. For fiscal 2019 Twitter’s revenues stood

at $3. 459 Billion, with net incomes of $1. 212 Billion (Economic Times, 2020). Ultimately, a

combination of user engagement initiatives and stable revenue growth and competitive

advantage against its peers, albeit enjoying higher valuations, suggests that the future may be

brighter for the company.

Products and or Services

Twitter provides services to advertisers, users, and data partners. Some of the products

comprise of the Twitter messaging platform, Periscope; Twitter promoted Tweets and Promoted

Trend headlines. Twitter messaging is a social media for public conversation and explanation in

real-time. Initially, the platform was limited to 140 characters. However, in 2017, Twitter

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doubled the number of characters to 280. Periscope broadcasts can be viewed through the

desktop or mobile Web browser (Meyer, 2019). Its promoted products amplify the visibility of

the company’s products and brands and also extend the conversations around the advertising

campaigns. Twitter’s promoted trends appear as the top list of trended topics for an entire day on

a global and country basis. Lastly, the MoPub and the Twitter audience platform are both

mobile-focused advertising exchange platforms.

Operations

According to Twitter’s annual report, the company has a single operating segment.

However, it reports its revenues in the following two categories; (i) advertising service, and (ii)

data advertising, and others. With this said, Twitter gains customers through their vast online

presence and registration of clients into their social networking platform. The model is almost

similar to other social networking platforms but differs in terms of competitive advantage. For all

of Twitter’s runaway success in attracting users, a hounding question after its mainstream

breakthrough has been on how it will make money. Twitter could secure funding without a hitch.

Nevertheless, for years its revenues stood at $0. Its first brush with profitability came in 2009

when Twitter sold the right for its tweets to become viewable on the search engines of Bing and

Google for the respective sums of $10 and $15 million.

However, this did not offer a consistently profitable model. The question was on how to

introduce advertising that can generate revenues and also with limited obstructiveness. The

founders collectively did not want to imitate the overt commercials of other social media

networks such as Facebook. In 2010, the company settled for promoted tweets. To date, this

continues to account for roughly 85% of Twitter’s revenue, and it consists of a company paying

so that a tweet, account, or trend (such as a particular hashtag) will show up on people’s feeds,

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with money paid out on a per-click and per-retweet basis. In 2015, this model generated around

$400 million in revenue. Although Twitter’s model was initially designed to make money

through banner advertising and sales from data, forces in the global internet market made them

shift their business model to focus on video content (Twitter Plc, 2020). Twitter also makes

significant revenues from data licensing. Twitter sells subscriptions to public data to developers

and companies that want to access and analyses real-time and historical data. Data is sold on

enterprise and premium levels. Twitter also makes money through service fees that are collected

from users that use the ad exchange app known as MoPub. Lately, video content has registered

more customer engagement capability than banner and text advertisements. Through the model,

Twitter makes money by sharing revenue with incentive video makes on a scale of 70 % to 30

%, where the content creators are the greater beneficiaries. The organization is also pushing for

bringing live streaming for events like the NFL into its revenue bracket. This is a new business

model that may help the organization increase its revenue base and are significant measures

towards enhancing the existing business model.

Vision

Twitter’s vision statement is “believing in free expression and the thought that every

voice has the power to impact the world (Twitter Plc, 2020a).” From the vision, it is clear that

Twitter prioritizes people ability to speak freely. The platform not only seeks to encourage

people to speak freely but also ensure that they give their voices to issues that can impact the

world. Simply put, there is no monopoly of ideas and tweets from anyone across the world can

start a global conversation on specific issues.

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Mission Statement

The company’s mission is “to give everyone the power to create and share ideas and

information instantly without barriers.” Additionally, Twitter adds that “business and revenue

will always follow that mission in ways that improve – and do not detract from – a free and

global conversation.” More specifically, the company’s sole purpose is to communicate

people’s ideas; even if revenues fall, the company would rather lose revenue that forfeits its

purpose. For Twitter, open discussion by the users on issues is far essential than the receipts it

gets from the ad revenues. Conceivably, this explains why Twitter has been operating without

profits for a while.

Corporate Values & Culture

Twitter’s Core Values are as follows; “civic engagement, political action, and

transparency.” As you will note, Twitter value is not to make profits, and this what sets it apart

from the other social media platforms (Mission Statement Academy, 2019). Twitter intends to

promote newsworthy conversations and to make the site entertaining. Looking at each value

separately will help to see the critical nature of the values.

a) Civic engagement refers to Twitter’s engagement with multiple stakeholders, ensuring

that the platform is relevant and suitable to its users. Stakeholders, in this case, refer to

policymakers, civic communities, and even ordinary users.

b) Political Action; although people use Twitter for multiple reasons, political action is one

of the major reasons for its use. Twitter has created an awareness of political issues, and

this helps explain the dominance of Twitter on political matters. More specifically,

Twitter values political action, and over the years, the company has promoted political

action in a plethora of ways. For example, Twitter hashtags for political events, including

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presidential elections, seek to increase public participation around discussed around

trending issues.

c) Transparency; Transparency refers to openness. Plausibly, Twitter values openness, and

this is demonstrated through biannual transparency reports that contain details such as

legal requests by companies and email privacy practices, among other privacy concerns.

Concerning the company culture, Twitter was ranked 25th on Glassdoor as the best

company to work (Huddleston, 2014). True to the company, the website reveals that Twitter

values, diversity, teamwork, and collaboration. Twitter has a purpose-driven environment that

fosters collaborative ream oriented spaces that allows employees to work together to create value

that they want. Aside from a corporate culture that values the employees, Lee et al. (2013) argue

that the mantra of corporate social responsibility starts with open communication and

transparency. Without a doubt, social media channel like Twitter does not fall short of such

credibility. Twitter organizes sustainable discussions hashtags that cover topics relating to

employee engagement, supply chain issues, corporate philanthropy, and human rights issues. The

hourly sessions attract several participants, including industry watchdogs, consultants, and

corporate executives. Beyond merely promoting good deed, CSR practitioners are also using

Twitter to stay abreast of the latest news and also build networks with peers.

Strength, Weaknesses, Opportunities, & Threats (SWOT) Analysis

Twitter Inc.’s main strength is its extensive customer base that consists of about 321

million active subscribers. The organization has a customer base of about 68 million active users

in the US alone. Additionally, Twitter’s strong brand image has enabled it to earn the first

player’s advantage in the real-time sharing field. Twitter’s powerful brand image was pioneered

in the promotion of hashtags (Bhasin, 2018). The real-time nature of tweets also gives it one of

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its strengths, which is its unique value proposition. The organization has also emerged as the

leading news platform

Internal instability is Twitter’s main weakness. The organization has, in the recent past,

suffered from high turnover rates among top executives and the company’s stock prices were the

biggest victims of the turnover. The turnover amounted to 40% and is one of the organization’s

top weaknesses. Another significant shortcoming of Twitter, which has resulted in frequent

security threats, is their ineffective user verification framework. This has led to the rise in the

number of bolt accounts, currently amounting to about 23 million accounts (). Such types of

threats are harmful to the organization’s business strategy and negatively impact revenue.

Twitter Inc.’s SWOT analysis reveals the opportunity of becoming a service offering

platform for organizations. Twitter can explore the prospect of being a useful tool that

organizations can use to offer real-time services to their organizations (Marr & DeWaele, 2015).

Another opportunity for Twitter in the social network platform is the chance to integrate with

other platforms to gain the experience of sharing customers. Twitter should also exploit the

opportunity of becoming a search engine and explore the market.

One of Twitter’s most significant threats is the organization’s no-profit business model.

Twitter Inc.’s current business model, albeit some changes in 2010, has not achieved significant

returns. Twitter is also threatened by the rise of fake accounts and the hacking incidents that have

impacted the financial value of the company’s data, which is among the company’s significant

sources of revenue (Bhasin, 2018). Another significant threat to Twitter’s business model is

competition from social networks like Facebook and Tumblr, Snapchat, and Instagram, which

have almost similar business models. The organization also faces the growing innovative social

media companies, which come up with new and convenient business models.

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Competition

Some of Twitter’s Major competitors include Facebook, Tumblr, Pinterest, and LinkedIn

Facebook is by far the largest social networking site, and advertising channel some of its

subsidiaries include Whatsapp, Instagram, and the Messenger. Tumblr is slowly gaining

popularity, albeit targeting different users from those of Twitter. Tumblr is also a microblogging

platform, which also allows users to post videos, images in simple words. On the other hand,

LinkedIn is a professional platform that promotes professional networking where potential job

seekers could meet recruiters (Twitter, Inc, 2019). LinkedIn users create profiles and invite

others to join the network, thus providing a leveraged platform for businesses to communicate

with the audience about the launch of a product. Similar to Twitter, Linkedln also has

professional discussions on topics, albeit the focus is on professional development. LinkedIn is

giving Twitter a fierce competition.

Lastly, Pinterest was launched in 2010 and is slowly becoming popular. It has more than

175 million active users allowing users to reach a vast number of people from different countries

across the globe. The software is a collection and storage tool for images, videos, and some

GIFs. Some other notable competitors include snap chat and Instagram, which drove Vine out of

the market. Instagram has a more enhanced user interface than Twitter. Users can apply inbuild

digital filters to images and also include geotags before sharing the images on the platforms. The

geotags allows people to know the locations of the business or clients. Instagram also

incorporates hashtags, which allows users to link previously shared content on their sites.

Further, Twitter enables marketers and businesses to upload videos publicly and privately.

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Management team/Leadership

Over the years, Twitter has shuffled its leaders and reorganized its organizational

structure to capture evolving business dynamics. For the most part, Twitter has struggled with

high turnover among the chief executive leaders. The following discussions capture the

appointments and resignation of leaders over time. Dorsey was the first CEO who saw venture

capital funding that backed the establishment of the company. In 2008 Dorsey became the

chairman, and Williams took over the role of the CEO (Enclopaedia Brittanica, 2020). However,

Williams stepped down in October 2010 and became a member of the board. Dick Costolo was

appointed in 2009. Costolo introduced promoted tweets as an avenue for revenue generation.

In 2012, October Twitter hired Matt Derella, as the new director of business agency

development. Matt Derela was a former Google Executive (Meyers et al., 2019). In 2014 the

former Goldman Sachs was named the company’s CFO. In 2015 Omid Kordestani became

executive chairman, replacing Dosey, who has been the CEO. Leslie Berland was appointed as

the chief marketing officer. Antony Nono was appointed as the CFO in 2016 after Adam Bain

announced his resignation. In the same year, Antony Nano was appointed as the CFO but left in

the year that followed.

Following the trouble in the management team, as well as weak financials, Elliott

Management Corporation announced it had acquired a stake in Twitter. Paul singer, a supports of

the Republican Party and activist shareholder, proposed the removal of Dorsey, the founder as

the CEO. To date, there is no news of the resignation of Dorsey as the CEO (History editors.

Com, 2019). However, following the acquisition, the company agreed to appoint new board

members and an independent director. In addition, the company agreed to approve $ 2 billion in

the repurchase of stock.

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Financial Outlook

Overall, Twitter revenues have been rising over the years. The company reported

revenues of $ 2.4 in 2017 because of security scandals that surrounded the company. However,

in 2019, Twitter’s annual revenues came to $ 3.46 Billion, a year on year increase of around 7.4

% from 2018 revenues of $ to $3 billion (Economic Times, 2019). Net incomes for 2017 were

negative, but the company reported positive income for the first time in 2018 and has continued

thereof, revealing that the company is struggling to monetize the platform. An analysis of the

balance sheet metrics shows favorable balances for assets versus liabilities. Twitter has about

three times more assets than liabilities.

On the other hand, the efficiency ratios have been, for the most part, stagnant over the

three years, except for the receivable turnover ratio that has been increasing. Unfortunately, the

ratios are lower than the industry averages (Investing.com, 2020), except for the previous year’s

gross margin and net profit margin. The leverage ratios hit a five year low of 1.5 in Dec 2019

(CSI market.com, 2020). However, other companies achieved lower leveraged ratios within the

internet service and social media industry. Investment returns, such as the dividend yield and

payout ratios, are also null.

In totality, the financial metrics are not favorable. However, the company has made

significant strides in the last two years. A combination of user engagement initiatives and stable

revenue growth and competitive advantage against its peers, albeit enjoying higher valuations,

suggests that the future may be brighter for the company.

Strategies

Doubling on the focus of being the go app for real-time information and news, Twitter

decided to turn things around to monetize the value it collects. The initial lack of a profitable

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business model is to blame for a slow pace growth for Twitter (McMillan & Madden, 2018). As

a result, the company sought alternative strategies an imminent course to grow its revenues. Over

the years, Twitter has considered numerous strategies to grow its revenue. To begin with, Twitter

started to monetizing its tweet database. Over the years, Twitter has massed trillion tweets,

which analytics firms have used to identify useful trends for organizations such as multinational

companies, news agencies, political parties, and environmental groups. Twitter grants access to

tweet databases for a fee (Twitter, Inc, 2020a). Additionally, Twitter charges interested parties’

data analytics fee for services given. Other avenues for improving revenues include Twitter

expanding network platforms to add live-streaming capabilities, a move that is likely to grow the

popularity of the platform based on streaming services.

Twitter also announced its strategy to monetize Daily Active Usage (mDAU), a crucial

measure of the company to generate additional revenue (Meyers et al., 2019). This comes in as

the company decided to control the conversations on its platforms. In response to this concern

and also privacy issues, Twitter has, over the years, acquired start-up companies to revamp

security measures. The company announced the strategy to make Twitter healthier and

conversational. Over the years, Twitter has relied on artificial intelligence to detect abuse and

quickly remove offending messages. Twitter has also cemented its security measures, making it

difficult for spammers to access and open accounts. The company also removes identified tweets

that appear to violate Twitter’s rules and policies. Additionally, the company launched

moderated replies in select regions.

Conclusion

Twitter Inc. has a distinct advantage due to its real-time nature. Developed in 2006, the

company has grown from a primary SMS based platform to revenue ad generation business.

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Twitter Inc. has also taken up video content and third party licensing to generate additional

revenues. Because of the lack of a profitable business model from the start, the company has

struggled to remain profitable. Dick Costolo introduced promoted tweets as an avenue for

revenue generation. Since then, the company has continued with the strategy of growing

revenues, including making acquisitions of start-ups. Internal factors such as turnover of

executives and security concerns continue to be a challenge. In retrospect, it is recommended that

Twitter should hire a competent team of executive leaders to drive the company towards the right

strategic direction. With competent leadership, Twitter Inc can improve its financial outlook and

also dominate the market.

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